The Enforcement Directorate has issued a ₹466-crore FEMA show-cause notice to Kerala Chief Minister Pinarayi Vijayan, former finance minister Thomas Isaac, and the CM’s chief principal secretary K. M. Abraham in connection with the KIIFB Masala Bond case, officials said on Monday.
The notice, served 10–12 days ago, was issued under the Foreign Exchange Management Act (FEMA) and does not require the recipients to appear in person.
A show-cause notice under FEMA is issued after the completion of an investigation, and the quantified contravention functions as a penalty.
The probe pertains to the end-use of the ₹2,000 crore raised by KIIFB through masala bonds and whether the transactions complied with FEMA norms.
KIIFB (Kerala Infrastructure Investment Fund Board), the state government’s primary agency for funding major infrastructure projects, had raised ₹2,150 crore in 2019 through its debut masala bond issuance as part of a plan to mobilise ₹50,000 crore for large-scale development projects in Kerala.
“ED notice is politically motivated; a routine election-time tactic,” said Thomas Isac, alleging that “This is election propaganda meant to benefit the BJP and UDF.”
“The action is intended to create a smokescreen during the elections,” he claimed.
He noted that the first masala bond notice came ahead of the 2020 local body elections; during the Assembly elections, the ED’s hunt peaked; and again, during the last Parliament election, the agency swung its sword. Now that Kerala is once again in election mode, the ED has reopened the masala bond case.”
Isaac said earlier notices had demanded his appearance along with bank records of his family members, which he called “an intrusion into my privacy.” He stated that even the High Court had asked the ED to explain why he was being questioned, an answer he says the agency “has still not given.”
According to him, “The reason is simple: there has been no FEMA violation in the masala bond transactions. The goal is to dig endlessly in the hope of finding something. KIIFB implements projects worth tens of thousands of crores, and the ED’s political masters must believe that if they dig hard enough, something will turn up. But despite all their efforts, they have found nothing, so they have changed their tactics.”
Isaac said that since the ED claims the investigation is over, he is not required to appear in person, noting “They say a FEMA violation has already been ‘established,’ which is why the Special Director of Enforcement (Adjudication) has issued a showcause notice. Personal appearance isn’t needed; a lawyer or chartered accountant can respond.”
He confirmed that the notice was issued to Chief Minister Pinarayi Vijayan, himself, and KIIFB CEO K. M. Abraham, “We received it four days ago and told no one. But, as usual, the ED leaked it to the media, triggering a flurry of breaking news, tactics that no longer have the effect they once did.”
Defending KIIFB, Isaac said, “The supposed offence is that KIIFB used part of the masala bond funds for land purchase, which is not allowed. But KIIFB didn’t purchase land, it acquired land, which is permitted. And by the time the funds were used, the RBI had already removed this restriction. We will give a detailed explanation after consulting legal experts.”
Sending a message to the agency, he said “ED should stop harassing us. We are not afraid. Don’t degrade the credibility of a central agency by playing politics. Whatever obstacles they create, we will not move even an inch from our promise to build a New Kerala.”
Referring to Congress leader Ramesh Chennithala’s televised remarks, Isaac said dryly, “He now says he had long declared the masala bond illegal. It’s ironic that on the very day ED filed cases against Sonia Gandhi and Rahul Gandhi, Congress leaders in Kerala rushed to defend the agency. At least remember that much.”
M. V. Govindan, Communist Party of India (Marxist) Kerala State Secretary, reacted sarcastically to the ED action, saying, “Every election season an ED notice shows up; I was actually wondering why one hadn’t arrived yet, and now it has.”
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